Non-exponential Discounting

Tomas Bjork, Mariana Khapko () and Agatha Murgoci ()
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Mariana Khapko: University of Toronto
Agatha Murgoci: Ørsted

Chapter Chapter 17 in Time-Inconsistent Control Theory with Finance Applications, 2021, pp 171-177 from Springer

Abstract: Abstract We now illustrate the theory developed in Chap. 15 , and the first example we consider is a fairly general case of a continuous-time control problem with non-exponential discounting. As mentioned before, non-exponential discounting captures preferences under which delayed rewards are not discounted at a constant rate. As delay discounting arises naturally in economics, understanding deviations from exponential discounting has important implications for a wide range of problems, from finance and pension economics to studies of climate change and natural resource allocation.

Date: 2021
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DOI: 10.1007/978-3-030-81843-2_17

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